Petrobras, Brazil's state-run oil company, plans to invest more than $5.0bn in Bolivia's gas sector in joint ventures with YPFB, the state energy company, bringing much-needed capital to a sector that has seen a dramatic fall in foreign investment in recent years.
The planned investment would exceed the total spent on developing Bolivia's gas reserves - the second largest in the region - since the sector was privatised in 1996. Last year, uncertainty over tax regulations prompted investment in the country's hydrocarbons to fall to its lowest in more than a decade.
The announcement is a boon for President Evo Morales, who took office last month on a pledge to nationalise the gas industry by securing the involvement of the state as an equal partner with international energy companies.
"We are working on a programme of investments in association with YPFB, with the government, of more than $5.0bn [euro4.2bn, £2.9bn) over the next five or six years," said Nestor Cervero, a director of the Brazilian company, after meetings with YPFB and government officials in La Paz.
Mr Cervero said Petrobras would sign an initial deal with YPFB by the end of the month that would include partnership agreements on gas production, industrialising the sector, thermoelectric power and biofuels.
Andros Soliz Rada, Bolivia's hydrocarbons minister, said the agreement would contain specific pledges on a project to build a gas-chemical centre on the Bolivia-Brazil border, the participation of YPFB in two refineries operated by Petrobras, the sale of natural gas and a new contract to operate in Bolivia.
Mr Soliz said the government would speed up the process of defining rules to govern the sector. "We will accelerate the structural reforms we need to start a dialogue," he said, adding that these would demonstrate that "the state is the absolute owner of hydrocarbons".
That may alarm other energy companies operating in Bolivia, such as Repsol, Total, British Gas and BP. All foreign investors in the gas sector apart from Petrobras have signalled that they could go to international arbitration over a hydrocarbons law passed last year that imposed higher taxes on existing contracts.
The government's relations with most international investors have deteriorated markedly since the Morales administration came to power.
Last week the president accused unnamed foreign companies of conspiring to destabilise his administration, a charge denied by the Chamber of Hydrocarbons, an industry body.